This was well explained .Thank You .My only confusion is which interest rates do the central bank increase ,the interest rate given to banks for their deposit or the interest rates charged to banks for their loans from central bank
With due respect Ma'am, Plz correct me if I am wrong- Usually its seen that in tight monetary policy the banks would provide loans to People at high interest rate as the flow of money in the market is to be reduced so that inflation is kept under control....in such cases the investors will turn towards buying the bonds and so the Bond Price will rise and Bond Yield will reduce.....and also during tight monetary policy in order to control inflation RBI increases the Bank rate so that liquidity decreases!!.... Plz explain Ma'am....
with reduced money supply....demand for money increases.... so ppl are offered better avenues... so even if they are left with good amount of money they choose altenative options than bonds.... which provide better returns ... so they go for that
Bond price is inversely proportional to interest rates(repo) , therefore, statement 1 is wrong. Also, Bond yield is directly proportional to interest rate(repo), therefore, a tight monetary policy will lead to rise in ond yield. Therefore, both the statements are wrong.
Yes bro that's what I thought in case of tight monetary policy DEMANDS FOR BONDS RISES(due to lesser avenues to invest in share mkt etc ) inturn increasing BOND PRICE AND LOWERING BOND YIELD.. But she is saying it's the opposite here😮
I had the same doubt too bro. But you have to look at it this way: As an investor, which investment would give me the best RoI? Or where can I park my money so that I get maximum returns? 1. During tight monetary policy, RBI asks the banks to increase their interest rates. Hence every investor will now start parking their money in FDs etc to get maximum returns. This means that there will be a reduced demand for bonds and hence their prices will come down and consequently their yield will go up. 2. During loose monetary policy, RBI will ask banks to reduce the interest rates. Hence, the investor will not park his money in FDs rather he will invest in bonds. Thus bond price will go up and bond yield will come down. Hope that helps! :)
No such explicit relation can be established but if..Interest rate or coupon rate low-- bond price low-- bond price low because demand will be low-- then more bonds can be bought for the same amount of money-- and when you can buy more amount in same value it simply represents appreciation of domestic currency! 🙏
In ideal monetary policy transmission, cut or rise in interest rate are transferred by banks to their investors. Like if banks are getting cheap loan, they will also provide cheap loan to their investor. As their cost of taking loan is less. If one bank decide not to and other does then they will lose in competitive market.
@@vishakhadagur8787 mam , I mean u said when interest rises , the investor gets more return from bond investment. Can u clarify which interest rate is in case here.
The best video with holistic coverage of such complex topic.... lots of appreciation.
धन्यवाद मैडम! बहुत ही सरल और सहज प्रकार से आपने समझाया। अपना आशीर्वाद सदैव ऐसे ही बनाये रखिये हम बच्चों पे।🙏🙏🙏🙏
Thank you for clearing these confusing topics. We Appreciate your efforts 🎉
Thank you ma'am... Aap UPSC ke Eco ke faculty mein 🔥🔥lagane wale ho.. Bcz ur concepts are crystal clear +Energetic Personality 👍
Well Explained. You made it so simple to understand. Thank you
The best explanation ever 👍🏻
Please create a playlist of all these lectures. Thank you for the best lectures
Commendable explanation ! Kudos
Very well explained
This was well explained .Thank You .My only confusion is which interest rates do the central bank increase ,the interest rate given to banks for their deposit or the interest rates charged to banks for their loans from central bank
It is interest rate given to the bank for their deposit.
Your issuer sounds more like Ishwar :D
Thank you mam . I understood finally
With due respect Ma'am,
Plz correct me if I am wrong-
Usually its seen that in tight monetary policy the banks would provide loans to People at high interest rate as the flow of money in the market is to be reduced so that inflation is kept under control....in such cases the investors will turn towards buying the bonds and so the Bond Price will rise and Bond Yield will reduce.....and also during tight monetary policy in order to control inflation RBI increases the Bank rate so that liquidity decreases!!....
Plz explain Ma'am....
with reduced money supply....demand for money increases.... so ppl are offered better avenues... so even if they are left with good amount of money they choose altenative options than bonds.... which provide better returns ... so they go for that
It's actually a see saw situation
Just mug it up bond yields proportional to interest rate
Bond price is inversely proportional to interest rates(repo) , therefore, statement 1 is wrong. Also, Bond yield is directly proportional to interest rate(repo), therefore, a tight monetary policy will lead to rise in ond yield. Therefore, both the statements are wrong.
Yes bro that's what I thought in case of tight monetary policy DEMANDS FOR BONDS RISES(due to lesser avenues to invest in share mkt etc ) inturn increasing BOND PRICE AND LOWERING BOND YIELD..
But she is saying it's the opposite here😮
I had the same doubt too bro. But you have to look at it this way: As an investor, which investment would give me the best RoI? Or where can I park my money so that I get maximum returns?
1. During tight monetary policy, RBI asks the banks to increase their interest rates. Hence every investor will now start parking their money in FDs etc to get maximum returns. This means that there will be a reduced demand for bonds and hence their prices will come down and consequently their yield will go up.
2. During loose monetary policy, RBI will ask banks to reduce the interest rates. Hence, the investor will not park his money in FDs rather he will invest in bonds. Thus bond price will go up and bond yield will come down.
Hope that helps! :)
Thank you so much mam. ...🙏🏻😊🙏🏻
From 15.04 your voice and concept both started floundering
😬😬
Excellent explanation. Thanks
Awesome explanation
Thank You!
Thanks a lot senior
Nice
Bohot bohot shukriya
Thank you
Mam plz discuss BPS
I just marked the same question incorrect in question paper
Thank you mam😊
तपड तपड तपड़ तपड़
very nice , thanks
Thank u mam
Why the investor invests in bank loans if can also get high bond yields in the market issued bond ?
Kbhi to issuer loan dene vala hota h.. Or kbhi issuer loan lene vala hota???
Why low interest rate on government bonds depreciates the value of Indian rupee ? Can anyone explain it ?
No such explicit relation can be established but if..Interest rate or coupon rate low-- bond price low-- bond price low because demand will be low-- then more bonds can be bought for the same amount of money-- and when you can buy more amount in same value it simply represents appreciation of domestic currency! 🙏
Sovreen Bond. Got it.
sovereign bond
When Interest rates increase, why would bank pay investors with high interest rate..
In ideal monetary policy transmission, cut or rise in interest rate are transferred by banks to their investors. Like if banks are getting cheap loan, they will also provide cheap loan to their investor. As their cost of taking loan is less. If one bank decide not to and other does then they will lose in competitive market.
@@vishakhadagur8787 mam , I mean u said when interest rises , the investor gets more return from bond investment. Can u clarify which interest rate is in case here.
It is interest rate paid to the bank for the loan they take from RBI :)
@@vishakhadagur8787 paid to bank 🤔🤔 🙄 please clear it
RBI से बैंक उधार ले रहे हैं तो बैंक pay करेंगे ना
Question in prelims 2021
👍👍💜
Guys its wrong answer to that question the answer should be Both 1&2 are correct
She is telling it wrongly..
Abe pehle apni english Sudhar😂
@@SaurabhSingh-mb3vx let's see your comprehension correct the sentence
Gandwu
Thank you